Value Conflicts in Jewish Business Ethics Part 2

  • Rav Asher Meir

Social Vs. Fiduciary Responsibility - Part 2 of 2

Leadership in Ethical Behavior

            Insofar as the ideal level of social responsibility in a Torah perspective may be higher than that attributable to the average shareholder, fiduciary responsibility still presents a conflict to the observant manager.  Is it possible to justify exemplary behavior on his part, at the evident expense of the investor?  After all, he is hired to be their faithful agent.

            The basis for an affirmative answer lies in a proper and non-superficial understanding of the manager's relationship to the firm, and of the goal of the firm itself.  Three main points are relevant:

            First, a manager is not only permitted but expected to implement a personal vision of the business.  This is a key element of effective management.  His vision of ideal community and employee relations, which will certainly be colored by his personal ethical standards (in our case, those of the Torah), are an inseparable part of his business ideal.

            Furthermore, even to the extent that the manager's personal values do not incorporate themselves naturally into the actual job of managing the company (as they do in point 1) he is not expected to sacrifice these values.  The company hires, or fails to hire, on the understanding that these values will be reflected in his work performance.  When a firm hires a religious executive, it is aware that he will miss days of work due to his religious commitments; likewise, it will be aware that certain acts within the job performance itself may be impossible for him to carry out.

            The most compelling argument, however, is that is unthinkable that any society should have on the one hand specific standards of proper behavior - in our case business ethics - and on the other hand an accepted method of social organization which effectively vitiates these same standards!  The social norm cannot have disappeared; it must have been transferred to the new form of organization.  Either the corporation as a "legal person" assumes ethical responsibilities, or the ethical responsibility of the owners is delegated to the managers together with the money-making responsibility.

            We can now crystallize an approach which incorporates all of these facets.  An ethical principle, though privately held, is by definition a standard which the individual sees as applicable to society as a whole.  Thus, the manager will automatically project his conception of right and wrong onto the community of investors.  As a result, the executive who acts in accordance with his convictions is thereby fulfilling, and not breaching, his responsibility to act on behalf of the owners.  Just as transgression cannot be delegated, wrong behavior in general resists delegation.  And the employer himself must take for granted that the manager will use his personal convictions as the applicable standard for any questions of right and wrong which he encounters.

Nothing Succeeds Like Success

            We suggested above that in contrast to the utilitarian business-ethics idea of "doing well by doing good," the Torah attitude more closely approximates "doing good by doing well."  The approaches differ in their ultimate goal, but they have in common that profitability - doing well - matters.

            Doing well matters first of all in the mundane sense that making a living per se is a necessity and indeed an important mitzva.  But even someone completely uninterested in personal material gain should be interested in running a profitable business.  A firm which is profitable will be able to extend its enlightened business practices to the greatest number of employees and communities; conversely, a business which fails not only will be unable to perpetuate such practices, but will become an example to others that "nice guys finish last."[1]

            It follows that any socially desirable practice which is not required by the letter of the law needs to be carefully examined if there is reason to believe that its application will interfere with the ability of the concern to prosper.  Business practices that interfere with sustainable success could be counter-productive even from the social standpoint.

The Religious Consideration

            We have defended the proposition that exemplary business behavior is in general justified even if it could be partly at the expense of shareholders, to the extent that it is part of a coherent and self-perpetuating vision of the business.  The justification is on ethical grounds, to which could be added a purely religious consideration: our sages have indicated to us that generosity in considering the needs of others is a source of material blessing to the giver.  They urged us to "Tithe in order to grow in wealth" (Taanit 9a). The manager who acts ethically and responsibly may justifiably put faith in God that no one will suffer from his thoughtfulness.

A Commandment is Greater When Performed Individually

            The thrust of this article has been very "lenient" in "exempting" the manager from acting in a cut-throat way.  Are there, nonetheless, cases in which a manager should refrain from adopting policies which he would see fit to promote if he were owner?

            It seems that it would be improper to use company resources for social goals which the individual investor could as well carry out himself.  Building a public library for the town where a factory is located out of genuine concern and gratitude for the community is praiseworthy, for the company is in a unique position to carry out such an undertaking.  But contribution to a recognized charity can be carried out by the individual shareholder from his earnings, and it seems he would have a valid complaint against a manager who used profits for that purpose.

            This reinforces the point made earlier that the manager acts with rectitude on behalf of, and not in spite of, his employers.  As manager of a company, he can promote society's welfare in ways which the individual cannot, just as he can promote profitability better than the individual.  It is in these specific areas that he should focus his efforts.[2] 

Conclusion

            The Torah bids us to sanctify all areas of life.  The area of business is certainly included, and certain business policies are called for in the sanctification of this most important area of human endeavor.  These policies may occasionally seem to hinder the pursuit of profits.  However, to the extent that they do not prevent the firm from prospering, it seems that they should not be viewed as coming at the "expense" of investors, and the responsibility of managing others' resources should not prevent the manager from running a "Torah-true" business.

 

 

 


[1] Indeed, commerce per se provides a benefit to society - see Mishnah Nedarim 4:6.  While condemning the "greed is good" philosophy which sees the invisible hand as exempting individuals from concern for the good of society, we can recognize that market forces do reflect valid social exigencies.

[2] This could be considered the "ethical corollary" of the financial maxim that company value cannot be increased by diversification or leverage activities which the individual investor could duplicate on his own.